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00:00 A patent is a right to exclude other people from doing things; to forbid them from doing certain things. Usually, in order to get a patent, you have to proof that what you are doing or what you want to exclude other people from doing, is something new, something, that didn’t exist at the time when the patent was granted. In a traditional patent system it wouldn’t be enough that you have to proof that it is new. You would also have to proof that you have some technical teaching, which means that you have created some effects that at the time were surprising from the point of view of natural science. You have to have enlarged the knowledge of physics or chemistry by making that invention. This is the traditional idea in the patent system, you don’t 01:00 get business method patents but you get patents on some contributions that are called `technical contribution´, they are understood to be a contribution to the realm of applied natural sciences. WELL, THATIS, I THINK, WHATTHEBASICCONLFLICTISABOUT. There are influential people in the patent system who think that these requirements that there should be a contribution to the realm of natural sciences is too strict and too narrow and that it limits the number of patents. This makes software unpatentable, because software is simply not in the realm of natural sciences. Software is just basically of logically organizing things, it is very similar to the business methods. And that is what the conflict here was about. So, we had us (FFII) saying: no, if the patent system is to function at all, - because the patent system is a highly dangerous thing.

LF: Has the patent system always been dangerous? … - It has always been highly dangerous. The patent system has 02:00 always been a system where you get many patent rights that are not worth the paper that they are written on and they take a lot of time and effort, they are very expensive to obtain and imply a lot of litigation that just wastes people’s time. But than you have a few of these rights which through some kind of accident become extremely sweeping and vast and large. They allow you to tyrannize an industry, they allow you to forbid people from what they would be doing anyway. And for some cases, people litigate for ages and they don’t succeed in bringing down this patent and then they have to pay up fees. They have to somehow cough up some money and form a licensing cartel and that, then, makes some people extremely rich. But that is like a lottery game. You have many of these patents that are too narrow and that, 03:00 in the end of the day, don’t bring any money because you just loose money on litigation. And then you have a few patents that, probably, never should have been granted because they are too broad – but those make the success stories of the patent system that everybody dreams of. You know, where everybody wants to be this big winner who says: `through my invention I got rich !´ And that is also what makes the patent system so popular. You have this little person dreaming of becoming the big winner. I think it was always a highly dangerous and highly problematic system.

It has been treated like that by economists from the start. You know, in Germany, when the patent system was introduced, most of the economists were against it. They all said that it is a bad system and it doesn’t foster to innovation, it fosters monopolies. On the balance, it is something that will do more harm than good, and the market itself stimulates or gives enough rewards for innovations.

04:00 This criticism of the patent system has been shared by such leading economists like Friedrich Hajek who has been very vocal and critical about this, and who is actually an icon of this so called `neo-liberal thinking.´

HP: Yes. For him, patents are a limitation on this `freedom of the market.´ And this `freedom of the market´, or: the myth about the patent system on which it is built is that the there is an `inefficiency in the market´. That `there is a market failure because somebody produces knowledge and everybody else gets a free ride and uses that knowledge.´ But in many cases this is just a myth. If you look more closely how the market actually works, - especially if you take into consideration that the knowledge takes some time to spread and that you get a first-mover advantage. And that you actually don’t have pure markets. 05:00 Mostly what you have oligopolistic markets or monopolistic markets.

LF: … that means, four or five players rule and small ones don’t have much room to move …

HP: Yes. You get some kind of balance in which none of the players can actually afford not to do intensive research and development. Even without the patent system you get such a market. The problem is that in our society, since the 19th century, since that time when all the economists made statements against patents in general, Otto von Bismarck e.g. in Germany pronounced himself against patents. Actually, there was the “Deutscher Patentverein”, a `German patent association´, and they campaigned for introduction of the patent system in Germany with the argument: England has it, we must have it – England is the leading nation. Just after they succeeded in getting their legislation passed through, 06:00 Werner von Siemens became an honorary counselor of the German patent office. And (only) ten years later, he held sessions with the patent office complaining about the flood of trivial patents and that he hadn’t foreseen that (development).

LF: … and that happened during which years? …

HP: … that was around 1888. So, the problem that are many or a large number of these patents that are granted are trivial and are they just clogging the market with transaction fees. (Hence), This problem is very old, but it is getting sharpened by several facts. And one of these facts is that the requirements for patentability are being loosened further and because of some naïve general belief in patents and which is shared by politicians and which hyped by media and that whenever there is some innovation, some patent shows up. And then the patent becomes a symbol of innovation.

LF: … we even have the saying in everyday German language of `eine patente Lösung´ meaning `a very clever solution´ … 07:00 something like `a patentable solution´ … something `very clever, very neat`´. This helps, I think, to keep up this myth in every-day language.

HP: … Yes, the voice of the economists has faded away, they found that it is of no use to criticize the patent system. Because as one of the leading theoreticians of the patent system around 1900, Mr. J. Kohler in Germany who actually made some quite good theories along the patent system. And one of the things he said was that the question of how to maintain the patent system is no longer a question in which economists have any voice, it is now a question of lawyers. Well you can imagine what happens when you have this whole system being no longer observed by the economists, there is hardly any economist who understands it or who takes interest in it. And even the lawyers usually say that the patent system is a very special 08:00 area of law, a very obscure area which is difficult to understand and hardly any lawyer understands it. And then you have only this small group of lawyers who are specialized on patents and they are a group of believers who think that patents are good ´per se`.

And this group than says: `Oh, what are we doing, all this money being made by the software industry!´ And then the nice argumentation, the nice formula, it was literally used by the European patent office, it says: `the legislator wanted the patent system to benefit all industries, where significant investments of the inventive mind are made.´ Although the legislator said, in 1973, that `software is not patentable,´ they said, `that can not be the intention of the legislator. Because, in 1973, it was not yet clear that software is such a money-making industry. In 1973, software was only 09:00 something that was found on some kind of cards with holes punched in it and that was delivered for free with the computer. So the legislator had no reason to care about rewarding inventiveness in this area. But today, there are reasons, evidently, and therefore our board of appeal of the European patent office degrees that: `software is not software as such. Software not as such is non- technical software. And only non-technical software can not be patented.´

So they introduced very strange explanations of the law, which basically, starting form 1986 and gradually intensifying, opened the patent system for logic and business methods and removed the last filters that assured any minimum level of quality. That means that today we have a patent system, especially in the area of software, 10:00 but also in other areas, where you can usually expect that a patent is granted for a very unsubstantial achievement. At least, if taken literary, it is a very painful block on activity, it just disallows any activity.

You asked me at the beginning: how would you explain this to an outsider? Well, if we explain it to an outsider who has experience on the internet, than you just look at `webshop.ffii.org.´ That site says: “The European E-Commerce emergency – you webshop is patented!.” For example clicking on a button to have this webshop-feature “send a gift to somebody” is patented by the European patent office, 11:00 that is an Amazon´ patent. This is very strange, because this Amazon patent had already created scandals in the USA and it still was, after that, granted a patented by the European patent office.

But there are many other examples. They are just ordinary tasks of a webshop, you can easily find 20 or 30 of these ordinary functions that you would want to have on your webshop and that are being forbidden. If you still insist that you want to have them on your web shop than actually you are liable to civil and penal law. And, anyway, patents are really potent weapons. You can use them to lock competitors out of the market. So if you have such a record of 4500 patents per year as Philipps has, - I think they are the record holder-, and Siemens is very close to them, at the European patent office. And most of these are software patents.

AL: …really!? …

HP: Yes, and now, if 12:00 you have a record like that, then that impresses the management(s). And if you have a chief of the patent and licensing department of, - for example Siemens has 200 people in the patent and licensing department- , they are a profit center, the go after other companies actively, and they form licensing cartels and they write cease-and-desist-letters. They also offer some kind of tax, so if you pay a kind of `Siemens tax´ than you can pursue your business. Or they use that to force some very effective, also PR-wise very effective at the moment, for some activities like closing down an exposition booth of a Chinese company in Germany, like you have a big export-drive of Chinese companies to Germany. You no longer have any possibility 13:00 to charge any tolls.

China is now in the World Trade Organization. We have mutual agreements of `free trade´. So they are allowed to export their things, all the means, previously available means of forbidding commerce have gone, so the only means that it is still there are patents. At the moment it seems that countries like Germany have a good position in patents and they have been been hectically investing and also piling up patents for the state in the 90ies . Just like a big corporation, the German Government, for example, has its own patent department which collects patents for the state, it is part of the ministry for science and technology. And they have been campaigning to get University professors getting involved in collecting patents. 14:00 So they have turned this in to some kind of state enterprise and a movement in which got the state involved.

That started in the 1980s in the United States and one of the driving forces for that movement was also the question: `What are we going to do against the rise of Japan?´. Japan was number one at that time of that book. Again, they believed or made believe that they are more inventive and that the Japanese are copiers. They thought that they could use patents as a strategical weapon to have market barriers in an age where they otherwise no longer can have market barriers. I think this kind of strategy has put us under attack from some people in the European Parliament saying that we are `lackeys of the Chinese.´ 15:00 But, off course, at the moment, the tide is already changing, because the Chinese are coming up strong … For example in the case of Philipps: a large number of their patents are Chinese patents, they are actually having their research-lab in China, because China is no longer a country where you just hire cheap labor, you also hire cheap researchers there, - and you have a mass of researchers.

When we were attacked in the European Parliament by the European patent lobby, they said: `what can we do against 12 Millions of Chinese engineers, they have many more and they are cheaper and better, we are without hope, we need patents´. And I said:`well, if you are such losers, than you better follow our advice, because the small and medium enterprises, the 3000 of them that we are representing, are not such losers. They don’t think they need patents to survive, they think they have found some market niche where they can have a future.´ But apparently, this old industry in Europe thinks that it needs patents in order 16:00 to survive against some yellow imperial force. Which is of course also a mass hysteria. (…)

At the same time, in fact, … last year, the figure of Chinese patents grew by more than 50% obtained Chinese patents. And in Europe there is an exploding number of Chinese patent applications. If you look at the Japanese, they are already the number-one patent holder at the European patent office, before the United States. They have been for many years, and it is not only junk patents they are holding, they are holding a lot of strong patents. This assumption itself that it is just a matter of gaining a temporary advantage where you think for the moment you might be able to uphold something of an obstacle of free trade 17:00 and thereby gain a little pause. That is one reason why this kind of patent hysteria is difficult to resist.

LF: In order to understand how today´s situation came together: how did the European patent office emerge?

HP: The European patent office has been gradually emerging after the second world war. There was a trend to europeanise everything. Creations of many European institutions which were all separate at that time and in 1973 there were finally the governments got together to decree a treaty on European patent granting organization - Patent examination and granting organization. Because it was thought that you can only unify the granting and that it would be too much to unify the actual litigation 18:00 and enforcement. Because that touches on civil liberties and things that the individual constitution based democracies must keep control of.

So they said: `ok for the patent granting – the granting itself is not ultimately binding it is just preliminary binding and it can be altered by the national jurisdiction. For this granting phase we have a national institution just to safe efforts.´ Since Germany is by far the biggest patenting country in Europe and it has the biggest patent literature, patent litigation literature and patent jurisdiction literature and highly respected doctrines which have been developed by the German Courts, so they said: `Ok, this must be in Germany.´ The German patent office was in Munich so they just built it side by side with the German patent office in Munich. 19:00 Well, this started in 1978. It had these rules that it was due to clear political intentions that software and business methods were those things that programmers do and it should stay out of the system. Hence, it should only be a system for the achievements in the area of applied science. But this was already at the time of the 1970s highly contested. Because we had countries in Europe that were granting software patents already, that was especially the UK, England. There were other countries which meant: other patent offices. Because country means always patent office in this context. There were other patent offices like that of France, which were very strongly against this. And which said: `no, this is a Pandoras´box, we can not have this kind of thing happening, it leads to unreseachable and trivial patents 20:00 and we want to keep….. this is a bad development happening in the States. We in Europe should do something different form the United States.´

LF: So we on the European continent should do something different? Wasn´t it introduced in GB in the 70s as well?

HP: Yes they just basically followed some kind of anglo saxon case law trend – of opening up. Like at the same time in the United States and Australia. They were opening up the patent system to software and business methods. They already didn’t have clear doctrines of how to distinguish. Which actually the German courts did have.

LF: … you mean `technical´and `conceptual?´

HP: Yes. The German courts even had this formula, it was a nice lengthy formula, quite impressive, saying: `a technical invention is a teaching for the use of controllable forces of nature to achieve an causally overseeable fact which is without intervention of human mental activity 21:00 the direct result of the forces of nature.´ That was the formula. I can say it in German, also: `Eine Lehre zum technischen Handeln unter Einsatz beherrschbarer Naturkräfte zur Herbeiführung eines kausal übersehbaren Erfolges, der ohne Vermittlung menschlicher Verstandestätigkeit unmittelbare Folge der Naturkräfte ist.´

LF: … it reminds me of Immanuel Kant …

HP: … yes, well, it were probably some Jesuits, philosophically trained people sitting in the highest German court and evolving, developing these impressively sounding doctrines. Which were actually… later the patent establishment tried to ridicule this doctrines. But they were not only impressively sounding, but actually highly practical. And I think without this doctrines the system got on a slippery slope. And actually it is very funny because the antics of the patent lawyers when they were trying to deconstruct this doctrine of the German court in 22:00 the 90s. We have a patent lawyer from the German federal patent court, who had been handing down all this software and pro-business methods, patents, verdicts. And he actually wrote texts in a legal magazine saying: `information has become the fifth force of nature.´ So you can see from that what a strange world this lawyers life in.

Patent lawyers are a society of their own and they don’t interact very much with the rest. That is the big problem here. We had just knocked at the door. But the reaction we have got was one of violent repulsion. It was a reaction of somebody invading my territory. A reaction 23:00 of course trying to portrait us as all kind of negative things like for example `lackeys of the Chinese´ or `mislead or legally uneducated´, `not knowledgeable about these things´ or `some kind of minority of long hair communists´, `open source freaks.´ Since then, I am always going with rather short hair, - it is too long at the moment already, I think, but I am also dressed in a suit. Because in this kind of warfare, we cannot afford to deviate too much in any way from bourgeoisie expectations.

24:00 The European patent office with the people who are controlling the European patent office or ministerial officials from the national patent systems who will spend all their life in the patent institutions and they are civil servants, they are usually in charge of the patent institution on behalf of the government – well, the ministers come and go, but the patent system and the patent office, the patent community with whom they deal, stays there every day. They are used to trust in that community and is their conventional wisdom, that, well, this community is in the driver seat and will always be. This matter is fairly complex, especially those officials in the ministries don’t really understand it. Actually, the people in the patent office are also very self-confident 25:00 that only they understand it. And these people at the Commission have no idea. And they are right, of course. The people who understand this matters are, to a fairly high degree, the judges sitting on those technical boards-of-appeal at the European patent office. They have a strong consensus, they have a strong community, because they decided around 1986 that they must go down that road, and that Europe’s industry wants it. The industry was the standing advisory committee of the European patent office, where you have the patent lawyers of the companies like IBM and Siemens and Nokia. Maybe, not Nokia at that time. But all these big companies who can afford people to go into these committees. And these tell the patent offices what industry wants and they said: now industry wants this exclusions of software and business methods to go. And since it was impossible to get them to go at that time, you don’t have a legislate process 26:00 for rewriting that European Patent Convention of 1973. So they had somehow to work around that convention by strange interpretations which was actually what they decided to do. Like saying: `software is something which is non-technical software. And non-technical is just anything unuseful, so anything software is patentable.´ Which is strange in the sense that the law says that `software is not an invention.´ They found this kind of sophistry and it became something that their institutions stood for. If they would back down from that (now), then, of course, they would lose their face. Just until 2000, they always spread this rhetoric that `software patents are needed.´ So it was clear to everybody that they want software patents. We could also show which kind of bad patents they had already granted. And it was not just 27:00 some extreme examples like (you see) in that webshop (on ffii.org), but if you look closer, and we documented that in detail, you found that every patent in the area of software which they granted, even those of somewhat admirable things like mp3., - just look at what those patents claim. They are just ridiculously broad. And to claim something in that breadth it is necessarily also trivial. Because anybody dealing with this problem would think in those directions. It was clear to anybody, any software programmer who cares to read patents will understand that it is just plain nonsense – he will understand: we must get together and stop this nonsense. So there was a very strong consensus in the community of software developers. And not only free software developsers, but also proprietary software developers. Well, even in some big companies 28:00 those who developed software and cared to take a look at patents will always say: `oh gosh, what cheap and awful and insane claims are these?´ We had done some good documentation, so we knew what we wanted and we had the big community supporting us – because of the European legislative efforts we also had media attention. We were not really professionals in doing media campaigning, but, at least, we did a view things there. We were available for the media for some comments and, occasionally, we made press releases, and that got us more and more attention.

At least, those who cared about software on the internet usually would closely follow what was happening in this legislative process. And although that didn’t 29:00 bring us much financial resources, - yet we also didn’t need all that many and we had enough to finance at least some basic things like, well, one person living in Bruxelles during the last years maintaining a network of contacts with people in the European Parliament.

So although it was nothing compared to the 30 permanent lobbyists of the pro-patent companies and those millions they spent on this, we had a sweeping victory in 2003 where the European Parliament approved a series of very clear and strong amendments to the European Commission-proposed directive text with a big majority. Well, they left no whish open for us, they were completely on our position. Then in 2005, when, again 30:00 under great pressure of those lobbyists, about 60% of the European Parliament took our position. Which then led to the downfall of the directive – the European Parliament in the EU does not have the power to decide on its own and it was clear that the people sitting in the European Council were those what I call: incompetent, but blindly following the European Patent offices bureaucrats. They would not be willing to conduct any discussion and they were very much afraid of any discussion and the so-called industry, - which means that the lawyers of those corporations governing the decisions in organizations like AICTA -, they told them now peals vote against this directive, this is getting too dangerous. Of course, there was a chance that we could make a difference. There were even movements in the Commission towards 31:00 our side. They saw this movements and said: now we must scrap this directive project. That was what had happened in July 2005. Of course, the condition for all that to happen was that we were actually able to, as you might say in the programmers language, `debug´ whatever came in terms of legislative proposals, to analyse and point out where the errors were and to document them in a neat form. There was probably a climate that was in general favorable to us. And it will be probably overstating things to say that citizens just need to work had on an issue and organize well and produce well researched documentations and supply MEP´s (Members of the European Parliament) with good analysis and usable proposals 32:00 than they can have an impact on politics. Well that is already a big barrier because to do that you need a lot of afford and very view people can do that. Most people are too busy to do anything like that and even if they might have the time, they might not have the skill. So that is already a big barrier. I am not so sure that if you just fulfill that that, you can have an impact on parliaments. There might have been more conditions for example some other favorable conditions such as general bad feeling about the directive in parts of the European Commission and in parts of the EU institutions. Some bad feeling about the European patent office or bad feeling about the US bullying, or bad press about software patents. Because even the European Commission changed its view, where previously they said we need 33:00 this directive in order to get the software patents than they wanted the same directive, but said that it was in order to prevent software patents, - but (with) exactly the same contents. They tried to camouflage what they were doing by using (other wordings) , for example by saying: `this is not about software, but about computer-implemented-inventions, which is entirely different.´ Of course, there is not a bit of difference between the word `software´ and the word `computer-implemented-inventions´, what they use is just newspeak meaning: software, in the context of patent claims. So it is nothing but pure software, - if it would not be pure software, it would not be computer implemented. Than it might be implemented by some kind of things like they said in their propaganda, which was about for example x-ray apparatusses or vacuum cleaners with some software in it. Than they would say: `well, this is really not about software, but it is about inventions in the field of applied sciences that are 34:00 somehow aided or controlled by software.´ That was where we started with the European Parliaments amendments they even changed the title of the directive – called it a directive on computer aided inventions. They introduced some things that were ultimately very simple and hard to resist. Finally, the pro-patent lobby had heavily invested, they had got a lot of MEPs (Members of European Parliament) on their side, but this front house somehow crumbled. Many of the MEPs that were originally seen to be in that boat could not be kept in it. They somehow thought that there was something fishy about this. So they got a worse and worse feeling about that directive.

LF: … that was five, six month before the vote?

HP: … even in the last weeks. In the last weeks, we made the biggest effort. It was always like that: shortly before the vote, things look very bad and very gloomy. It looked like we could never 35:00 get through. And there were even within our camp always some people proposing some back-down or compromise, - which is usually unworkable. It just showed that there were already some kind of panic, but then we were able to use the attention and the dynamics created by that gloomy atmosphere and by the intensive lobbying of the other side.

LF: and what sort of Europe, in terms of software, - just to end it up with a short question -, would you like your children to grow up? HP: … Well, the patent system has become so dangerous and so politically uncontrollable and its merits have become so unclear. I think it would be safer to life in a world without that system.

LF: … but would it not need 20 or 30 years to grow out of it?!

HP: …, well that is a long way to go. Of course, what my message to the patent world is: 36:00 `Either get back to the doctrines of `forces of nature´ or face the elimination of your system.´

I am afraid that they are unable to get back. They opt for demise of their system because they are just unable to grasp the chances.